In a sign of what may be to come, two members of Congress have announced plans to use the Congressional Review Act to repeal the Office of the Comptroller of the Currency’s “True Lender” rule, which was put into effect to help facilitate the sale of loans and portfolios from banks to debt buyers, among other groups. Sen. Chris Van Hollen [D-Md.], Sen. Sherrod Brown ]D-Ohio], and Rep. Chuy Garcia [D-Ill.] announced their plans yesterday, seeking to overturn the rule because it “allows predatory lenders to skirt state laws meant to curb interest rates on loans and opens the doors for these lenders to prey on vulnerable consumers.”
The OCC, which regulates national banks, issued the rule last October. It says that the bank that makes a loan is the “true lender” in the context of a relationship between a bank and a third party. A bank that makes the loan is the true lender, if, as of the day the loan is originated, it is named as the lender in the loan agreement or it funds the loan.
The proposed rule supplements a rule that the OCC and the Federal Deposit Insurance Corp. each recently implemented that confirms the “valid when made” doctrine, which states that the terms of a loan remain valid after the loan is sold to an entity by a national bank.
Consumer advocates praised the news of the attempted rule’s repeal.
Senators Van Hollen and Brown are standing up to restore the power that states and courts have had since the time of the American Revolution to prevent evasions of critical state interest rate limits that stop predatory lending,” said Lauren Sanders, the Associate Director of the National Consumer Law Center, in a statement. “The OCC’s rule eviscerates those powers and protects predatory lenders.”
The Congressional Review Act provides Congress with a vehicle to repeal rules that are issued by federal agencies. Through a joint resolution, Congress can overturn the rules. There have been some who have wondered if Congress will take similar action to repeal Regulation F, the Consumer Financial Protection Bureau’s debt collection rule.
